From the E&P side of the world, it seems like a drilling rig is all you really need to start producing oil and gas in a new area. We take for granted the infrastructure that must be in place to sustain high oil and gas activity in an area.
A major factor in infrastructure planning is power. While many drilling rigs are powered by on-site generators, long term production and mid-stream processing are facilitated by the electrical grid. Power companies must make costly investments to keep up with need. My friend Tim, a project manager for a large electric utility company in Texas, says the latest boom in the Permian Basin was sudden and brought more demand than anticipated. “The oil related growth in West Texas was greater, and much faster, than we were accustomed to. It’s considerably more expensive and difficult for us to react to growth as it occurs versus planning for it in advance. In these cases, we typically depend on growth estimates from oil and gas companies, which aren’t always reliable or timely.”Texas is a top US player in both oil and gas, and electricity. Texas leads the nation in both total petroleum consumption and crude oil reserves and production. As the second largest state (behind Alaska), Texas is the top producer and consumer of electricity. Befitting its independent attitude, Texas is the only contiguous state with an entire standalone electricity grid; other states rely on interstate electric grids (Energy Information Agency).
Without a reliable way of knowing where the demand will be greatest, utility companies can only do their best to react to need as it presents itself.
Drillinginfo’s DI Analytics package is designed to provide quick, easy to understand insights about what’s happening in oil and gas. Users can avoid last-minute decisions and gain powerful, localized insight for preparing in advance. Tim’s company has planning groups that work with their engineering departments to determine long range plans, and they release them yearly. According to Tim, “A tool like DI Analytics could help not only us, but also many other types of companies, make more informed decisions regarding the always-changing oil and gas industry.”
DI Analytics can predict power demand in several ways. Perhaps the earliest indicator of coming need is leasing activity. In new areas, leasing precedes all other activity. Before the latest Permian boom, leasing picked up dramatically in early 2011.
Figure 1: The DI Analytics Leasing Activity module shows Gross Acres leased in the Permian Basin since 2004. A dramatic uptick (Q1 2011) can be observed. Leasing activity is an early warning for coming infrastructure demand.
Leasing activity is followed by a wave of permitting which provides a more accurate picture of where exactly new infrastructure may be needed. Permit counts reveal the amount of need, and permit locations help planners zero in on where exactly the demand will be strongest. Permitting activity was strong in the Permian basin from 2011 to the present.
Figure 2: DI Analytics Permits Counts through Time allows you to see permitting activity for a play broken down by a statistic of your choosing. Here, it is broken down by play area.
Figure 3 (Top): DI Analytics Permit Activity Module shows where drilling permits are issued. Changes in locations over time show how exploration is refined as the play develops. Figure 4 (Bottom): Side by side maps of permitting activity in 2005 (left) and 2014 (right) show that during the latest Permian rush, exploration is more focused and centers on two basins: the Delaware Basin to the west and the Midland Basin to the east.
Figure 5: Purple hatched lines represent major electrical lines (≥ 345kV). The Midland Basin (to the east) is in close proximity to power lines, but the Delaware Basin (to the west) is situated away from the main distribution lines. (Map: Energy Information Administration)
Figure 6: Production has been increasing sharply since 2010. Sustained production suggests real demand for electric power, whereas leasing and permitting are better predictors of future demand.
Figure 7: Population growth for Midland County from 2000 to 2012 followed an upward trend, adding to the demand for electricity. Much of this growth can be attributed to the oil and gas industry. The grey areas represent times of economic recession. (Graph: Federal Reserve Bank of St. Louis).
Production is a snapshot of realized demand. If there is high production for a month, there will be high demand for electricity, not only at the well site, but also at nearby processing plants. Sustained high production and permitting in an area will likely point to population growth as well. Production activities are supported by an influx of specialized workers, including drillers, service companies, geoscientists, and administrative support.
No matter how your enterprise supports the oil and gas industry, DI Analytics can reveal critical turning points and help you plan and execute more efficiently.
What do you think? Leave a comment below.
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